“In the Clover” The “Luck of the Irish” could be around the corner for Investors, who are becoming wary of the turbulence associated with the resource boom stocks. Shamrock is the three leaf version of Clover, which is supposed to bring you luck, if you wear it in your lapel on St Patrick’s Day. It is the Trademark of CLV, a company which your analyst believes has plenty of Upside over the next 6 months, it appears to have been heavily oversold in the last few months, it is in the bargain basement, at its current trading level of 11cents/share.
History on ASX
CLV listed on the ASX at the end of 1999, the public were offered 50 million shares at 30cents, with one free option (30cents July 2004) for every 10 shares subscribed. The issue was oversubscribed, market capitalization on listing was $39 million (130 million shares at 30cents). In the 6 years since listing CLV has had a chequered history, 30 million more shares have been issued, total number on issue now is 160 million, market cap. is down to $18 million, as CLV is now trading at 11cents. The NTA (net tangible asset) backing per ordinary share for the Half-year ended 31 Dec 2005 was 13.66cents, actual CASH backing per share was 7.5cents. The market appears to know something significantly negative, which your analyst has NOT been able to discover.
The peak price reached by CLV was 72cents in July 2003, the steady decline since then represents a buying opportunity for patient investors, who like the potential for a turnaround story. CLV is a manufacturing/marketing company in currently neglected sectors (Food/Biotechnology), when the resources boom peters out, these sectors will come back into focus. Washington H Soul Pattinson & Company Limited (WHSP) owned 30.2% of CLV on listing and retains 28.6% today.
This heavy degree of loyalty by WHSP, is a demonstration of confidence in CLV, by a shrewd investment portfolio player. The declining share price gives the impression that CLV is a basket case, however, in last 2 years CLV has been PROFITABLE, in FY 2005 CLV made a profit of $764,000 on Sales revenue of $14,326,000, in FY 2004 results were $1,237,000 profit on Sales of $17,073,000. In the Original Prospectus issued in 1999, CLV had forecasted much higher levels of Sales and profits by now, they have NOT delivered but the market punishment appears excessive.
Business History
Clover was established in 1988 and is a leading Australian participant in the field of Lipid technology (natural oils). In conjunction with NU-Mega it uses sophisticated techniques to develop and produce quality, natural oil based products, which contribute towards human health. Clover is a market driven “research based” Functional Food Company which has developed a prominent position in long chain polyunsaturates (LCPs), Omega-3 (including DHA) and Omega-6 (including GLA) oils.
These Omega-3 oils are important in infant nutrition, and beneficial against a range of human disorders including coronary heart disease, rheumatoid arthritis and hypertension. Clover is now an established producer of nutraceuticals based on fish oils and is the WORLD leader in the MICROENCAPSULATION of oils for use in ‘functional’ food products such as breads and dairy products. Tuna fish oil is rich in Omega-3 fats, which are essential nutrients for optimal brain health and development.
Patented Technology --- Oil Microencapsulation
CLV can claim to be a research based company because it has developed and implemented its own proprietary technology to microencapsulate fish oils, a process that preserves efficacy. The difficulty of incorporating Omega –3 fats in foods products is that they are highly susceptible to OXIDATION. This affects the sensory properties of any food products in which the oil is incorporated by imparting ‘fishy’ flavour and odour. It also adversely affects the shelf life of the food product.
To overcome these problems microscopic droplets of fish oil are enclosed in robust films that protect the oil from the environment and other ingredient. Encapsulation also masks the fishy flavour and odours of the oil. In 2003 the Australian research in microencapsulating fish oils made a splash at the American Oil Chemical Society. CLV and scientists from Food Science Australia were awarded the Society’s International Achievement Award. The value of this technology is not recognised in the current weak share price.
The Future Prospects for CLV
DHA, Docosahexaenoic Acid, is one of the major building blocks of the human brain, nervous system and eyes. It is essential for normal brain and eye development and function. DHA intake is low and declining in the Western Diet. DHA in western breast milk is on the decline. in The Japanese intake of DHA is estimated to be 4 times the American intake.
CLV made 2 recent announcements that auger well for their future prospects, after a six-month search they have appointed a new CEO (Ian Brown) with the required scientific and marketing experience to build on their established position. The other announcement relates to securing a supply contract for the next 5 years with Starkist Samoa Inc (Heinz subsidiary) for CRUDE TUNA OIL. This is an extension of the excellent relationship that CLV has always had with Heinz. The Starkist cannery is a major tuna supplier to the USA market. The market for Omega-3 DHA from Tuna Oil continues to grow internationally, increasing the demand for crude tuna oil supplies.
Clover and Austgrains Pty ltd established a partnership called Future Food Ingredients and built a factory, investment $3 million 2005, in Moree (NSW) to commercialise technology for the production of unique functional SOY Ingredients from non-GMO whole soybeans. The technology removes the ‘beany’ flavour from soybeans so people can take advantage of the health benefits of soy in great tasting foods. This diversification will soon start to make a contribution, hopefully it will improve CLV results.
DHA is added as deodourised oil or as powder, emulsion or gel forms to --- Fat products e.g. Margarine, Dairy products e.g. Cheese, Dry products e.g. bread, Infant formula e.g. Milk powder, Moist products e.g. Canned fish &meat, Specialised nutrition e.g. Maternal. Your analyst suggests that investors heavily partake of some of these products over next few days, their brains should get a healthy boost, leading them to the conclusion that CLV is a LOW RISK BUY which will make a welcome longer term profit contribution to their stock portfolio
CLV Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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